monetary aggregate- a measure of the amount of money or financial assets classified as money supply

Monetary aggregate M2

Second monetary aggregate M2 has a broader character than the M1 monetary aggregate, since money is used in it in the same way as a store of value. It includes those assets that have a fixed nominal value and can be converted into a means of payment. But directly specified assets cannot be transferred from one person to another. The most familiar to us are deposit accounts, demand savings deposits and term deposits. They do not entitle asset owners to use checks, and demand deposits earn negligible interest. In addition, in the financial markets of developed countries, money market mutual funds, i.e., those intermediaries who submit so-called titles of ownership to the population and buy short-term securities with a fixed interest rate, are included in the M2 monetary aggregate. The resulting profit from these securities passes to the owners of the titles of ownership. While in principle money market funds can be used for payments, this rule is rarely used in practice.

The composition of the monetary aggregate M2 includes highly liquid financial assets, such as time deposits and short-term government securities, which, although they do not function directly as a medium of exchange, are easily converted into cash. This way you can withdraw cash from term deposit at a commercial bank or savings institution. Or you can also request a transfer of funds from such an account to a current account.

It is necessary to pay attention to the fact that each country has its own official definition of the monetary aggregate M2. For example, in the UK, M2 is a measure of the money supply, which includes cash in circulation, private sector sterling current and interest-bearing bank accounts, deposits in building societies and savings banks; in the USA - M1 plus savings accounts, term accounts up to $100,000, one-day Eurodollar deposits, shares of money market mutual funds, etc. Therefore, with a general understanding of the essence of this monetary aggregate, the nuances can vary significantly.

In general, the monetary aggregate M2 is intended not for circulation, but for accumulation, and that is why it is characterized as a liquid means of accumulation. It is the relationship of the state with M2 that causes the need for devaluation and revaluation of the currency.

The monetary aggregate M2 better reflects the relationship of the money supply with other economic variables that appear in
the money exchange equation: M * V =Py, namely with the velocity of money V, the weighted price level P and the real volume of production y. Therefore, since the 1980s, many economists have become inclined to think that the M2 parameter is more suitable as a basis for the theory and conduct of economic policy.

There are, however, other points of view, whose supporters do not consider any of the parameters (M1, M2 and M3) to be optimal, and therefore recommend choosing a monetary aggregate that would be a common weighted aggregate of all liquid assets.

Monetary aggregate M1

Monetary aggregate M1

M1 money supply - in the US - the narrowest measure of the money supply, including deposits not owned by the federal government, central bank or financial institutions:
+ cash (currency); the share of cash in M1 is less than 1/3;
+ funds on current accounts (transaction deposits);
+ demand deposits (demand deposits);
+ Other checkable deposits.
The structure of M1 does not include "plastic money".

In English: Monetary aggregate M1

Synonyms: Money for transactions

English synonyms: transaction money

Finam Financial Dictionary.

See what "Money supply M1" is in other dictionaries:

The United States has the broadest definition of the money supply. L = M3 + short-term treasury securities. In English: Monetary aggregate L See also: Monetary aggregates Financial Dictionary Finam ... Financial vocabulary

In the United States, a measure of the money supply, covering the means of circulation and the means of accumulation. M2 = M1 + + money market deposit accounts; + shares of investment funds of open type (money market mutual fund shares); … Financial vocabulary

In the US, a money supply measure covering M2 + large term deposits ($100,000 or more); + buyback agreements with long terms. In English: Monetary aggregate MZ See also: Monetary aggregates Financial dictionary ... ... Financial vocabulary

monetary aggregate- A composite monetary variable used to measure the supply of money in circulation (and as such is sometimes taken as an intermediate goal of monetary policy or an indicator of the state of the monetary sector), which includes in ... ... Technical Translator's Handbook

- (M1) A broader measure of money supply. In the UK, M1 includes banknotes and coins in circulation plus funds in private sector checking accounts plus funds in deposit accounts against which checks are drawn. In the USA it is... Economic dictionary

- (M0) The narrowest measure of money supply used in the UK. It includes banknotes and coins in circulation, bank cash and balances on correspondent accounts of commercial banks in … Economic dictionary

- (M2) The indicator that most closely matches the definition of money in the broad sense of the word. In the UK, M2 includes banknotes and coins in circulation plus funds in interest-free bank deposits, plus funds in deposits… … Economic dictionary

Money supply L- the MOH money supply plus other liquid assets (for example, US Treasury bills and savings bonds) ...

Monetary aggregate M2- monetary aggregate Ml plus the following components: 1) savings deposits and term deposits of small sizes in all depository institutions; 2) one-day REPO agreements in commercial banks; 3) overnight loans in eurodollars of US residents ... ... Modern Money and Banking: A Glossary

Monetary aggregate MZ- M2 monetary aggregate plus the following components: 1) large term deposits (over $100,000) in all depository institutions; 2) term REPO agreements in commercial banks and savings and loan associations; 3) mutual funds ... ... Modern Money and Banking: A Glossary

Cash is the basis the entire monetary system, the most liquid money and cash reserve, which attaches particular importance to ensuring the strength and stability of the cash component of the money supply. The most important quantitative indicator of monetary circulation is the money supply. The money supply is the total volume of purchasing and payment means serving the economic turnover and belonging to individuals, legal entities and the state. The characteristic of the total money turnover is reflected in monetary aggregates, which are indicators of the volume and structure of the money supply.

In economic theory, an aggregate is a set of specific economic units that are treated as if they constituted one unit. Monetary Aggregates are used to analyze quantitative changes in money circulation on a certain date and for a certain period, as well as to develop measures to regulate the rate of change in the money supply and its individual components. Based on this analysis, the Central Bank develops the main guidelines for monetary policy and exercises control over the money supply in circulation.

The principle of building aggregates is based on the fact that all goods can be ranged from absolutely liquid to absolutely illiquid. Consistently adding less liquid funds to the most liquid ones, we obtain, respectively, the indicators M0, M1, M2 ... Aggregates M0, Ml, M2, M3 constitute the total money supply. Each of the aggregates represents a part of the money supply. The M2 aggregate is taken as an indicator of the money supply used for macroeconomic analysis and statistics.

Monetary aggregates are indicators of the structure of the money supply. Monetary aggregates are types of money and funds that differ from each other in the degree of liquidity (the ability to quickly turn into cash). In different countries, monetary aggregates of different composition are allocated. The IMF calculates a common M1 indicator for all countries and a broader “quasi-money” indicator (term and savings bank accounts and the most liquid financial instruments circulating on the market).

Monetary aggregates are a hierarchical system - each subsequent aggregate includes the previous one.

Monetary aggregate M1 includes cash in circulation outside the banking system (monetary aggregate M0) and balances in national currency on settlement, current and other demand accounts of the population, non-financial and financial (except credit) organizations that are residents of the Russian Federation.

Monetary aggregate M2 includes the M1 monetary aggregate and balances in the national currency on the accounts of time deposits and other funds attracted for a period of time from the population, non-financial and financial (except credit) organizations that are residents of the Russian Federation.

In the financial statistics of Russia, monetary aggregates M0, M1, M2, M3 are used to analyze the ongoing changes.

The unit M0 is cash in circulation.

Aggregate M1 - aggregate M0 + funds of enterprises in various bank accounts, demand deposits of the population, funds of insurance companies.

Aggregate M2 - aggregate M1 + time deposits of the population in savings banks, including compensation.

Aggregate M3 - Aggregate M2 + certificates and government bonds.

Central Bank of the Russian Federation calculates monetary aggregates M0 and M2. The M2 aggregate represents the amount of cash in circulation (outside banks) and balances in the national currency on the accounts of non-financial organizations, financial (except credit) organizations and individuals who are residents of the Russian Federation.

Money supply is the most important indicator of the amount of money in circulation. The money supply includes the total amount of money - cash and non-cash, which is currently in circulation, belongs to various economic entities. In addition to money, it may include other highly liquid financial assets that can be converted into money with minimal loss of time and money. These include, for example, certificates of deposit of large commercial banks, short-term treasury bills, Treasury savings bonds. The order in which they are included in the composition of the money supply depends on the national characteristics of its measurement. Thus, the money supply is a heterogeneous indicator in its structure.

To characterize the structure of the money supply, monetary aggregates are used - M0, M1, M2. monetary aggregate is a statistical indicator that characterizes the volume and structure of the money supply.

With all the variety of methods of statistical accounting of the money supply in different countries, monetary aggregates in the most general form can be represented as follows:

М0- includes cash in circulation (banknotes, metallic coins, and in some countries treasury bills), including cash in bank cash desks;

M1- contains the M0 aggregate plus funds in current bank accounts and demand deposits, which can be immediately used either in the function of money as a medium of circulation or as a means of payment;

M2- consists of the M1 aggregate plus fixed-term and savings deposits in commercial banks: funds from these deposits become available to the depositor only after a certain time has elapsed, provided for by the deposit agreement between the bank and its client;

M3- contains the M2 aggregate plus savings certificates in specialized financial and banking institutions;

M4- consists of the M3 aggregate plus shares, bonds, certificates of deposit of commercial banks, bills of individuals and legal entities, i.e. monetary obligations that take a long time to turn into "live" money.

The delimitation of monetary aggregates is based on the degree of their liquidity, i.e. the possibility of quick, with the least risks and costs, the conversion of various forms of deposits and savings into rapidly realizable funds. Monetary aggregates are ranked according to the degree of liquidity decrease. So the monetary aggregates M0 and M1 characterize the most liquid component of the money supply. They include components that fall under the definition of money supply in the narrow sense of the word. Other aggregates of the money supply include money that is used in settlements with certain restrictions. In their essence, they are rather substitutes, or “quasi-money”.

The qualitative composition of monetary aggregates is ambiguous in different countries, which is due both to the traditionally established theoretical ideas about money, the ratio of cash and non-cash components in the total money turnover, money and financial assets, and the specifics of the monetary system and the methods used to regulate it by the central government. bank. So, in the United States, there are 4 main monetary aggregates in the composition of the money supply:

M1- cash in circulation held outside banks, traveler's checks, demand deposits and so-called other checkable deposits;

M2– Aggregate M1 plus non-checkable savings deposits, term deposits in banks, one-day REPO operations (purchase and sale of securities with repurchase and sale), one-day dollar deposits of US residents, funds in mutual fund accounts.

M3- M2 aggregate plus short-term government bonds, term buyout agreements concluded by commercial and savings banks, term Eurodollar deposits of US residents in foreign branches of US banks.

The specificity of the system of monetary aggregates used in the USA is the use of aggregate L, consisting of aggregate M3 plus treasury securities and banker's acceptances placed outside the banking system.

In Japan, central banks use 4 monetary aggregates. However, the widest unit M4 includes, along with cash in circulation, funds on current and term deposits in commercial banks, and also funds invested in one of the types of short-term securities - certificates of deposit.

In France, ten monetary aggregates are used to determine the money supply, in Switzerland and Germany - three, in England - five. Despite the difference in the qualitative composition of monetary aggregates and their different numbers, in recent years there has been a trend towards the universalization of financial markets, which predetermined the gradual convergence of the composition of monetary aggregates.

Each country that is a member of the International Monetary Fund (IMF) calculates the monetary aggregate M1 according to the methodology developed by the Fund - M1 includes cash and all types of checking deposits. Along with it, a broader indicator of the money supply is calculated - “quasi-money”, that is, urgent and savings accounts of banks and the most liquid financial market instruments.

The money supply in the Russian Federation is calculated by the Central Bank as of the 1st day of the month based on the consolidated balance sheet of the banking system. The composition of the money supply in Russia includes the following monetary aggregates:

М0- cash in circulation;

M1- consists of the M0 aggregate plus funds on settlement, current and special accounts of enterprises and organizations, on the accounts of local budgets, budgetary, trade union, public and other organizations, plus State Insurance funds, plus deposits of the population and enterprises in banks, plus demand deposits of the population in Sberbank;

M2- consists of the M1 aggregate plus fixed-term deposits of the population in Sberbank;

M3- consists of aggregate M2 plus certificates and government bonds.

Such a definition of the structure of the money supply increases the activity of money circulation management, as it allows you to take into account the degree of pressure of money in each aggregate on the formation of effective demand, and, consequently, prices in the market of goods and services. In the Russian Federation, the M2 aggregate is used as the main monetary aggregate used in the calculation of current macroeconomic indicators.

In any country, the money supply is the object of constant state regulation. The need for such regulation is determined by the fact that the size of the money supply and the rate of its growth affect the state of other economic indicators. So, for example, if the money supply grows much faster than the volume of national production, then, other things being equal, this can lead to inflation. At the same time, the state resorts to additional money emission in order to stimulate economic growth, and in this case, the increase in the amount of money in circulation reduces the cost of loans and contributes to the expansion of productive investment. If the growth of the money supply does not keep pace with the growth in the volume of national production, then the money in circulation at a constant rate of circulation may not be enough to properly service all payments and settlements, and then the uninterrupted operation of the national economy may be called into question. Counterparties will simply have nothing to pay each other with, they will not be able to repay the emerging monetary claims. Moreover, the main debtor, as a rule, will be the state. This is what will keep the money supply from growing.

The amount of money needed for circulation depends not only on the volume of economic turnover in the country, but also on the velocity of money circulation. With the acceleration of the turnover of money, it is possible to serve a greater economic turnover with a smaller amount of money as a medium of circulation and a means of payment.

In addition to indicators of the velocity of circulation of the money supply in the Russian Federation, the following are determined:

The rate of return of money to the cash desks of the institutions of the Central Bank of the Russian Federation as the ratio of the amount of money received at the bank's cash desks to the average statistical mass of money in circulation;

The velocity of circulation of money in cash circulation, which is calculated as the ratio of the amount of receipts and issuance of cash to the average annual mass of money in circulation.

In modern economic literature, a generally accepted concept has been formed about the need to single out among the various types of functional money the so-called strongest money, which means the amount of central bank liabilities in relation to the private sector, reflected in its balance sheet. As a development of the concept of “the most powerful money”, the term “ monetary base”, i.e. the total of those liabilities of the central bank towards the private sector that it has the ability to control. The components of the monetary base are banknotes and coins held by the population and in the cash desks of banks, cash from commercial banks deposited with the central bank in the form of required reserves. In the Russian Federation, a “narrow” and “broad” monetary base is calculated. The concept of a narrow monetary base includes the M0 aggregate (cash in circulation), plus cash in banks' cash desks and banks' required reserves in the Bank of Russia. The broad monetary base additionally includes funds of commercial banks on correspondent accounts with the Central Bank of the Russian Federation. Changes in the structure of the monetary base are characterized by an increase in the share of cash in circulation, the preservation of an almost unchanged share of required reserves, with a relative reduction in its other components.

Sources of growth in the monetary base can be both an increase in net international reserves Bank of Russia and the Government of the Russian Federation, as well as the volume of their net domestic assets. In the Russian Federation after 1998, the main source of growth in the monetary base is the increase in net international reserves, which occurs due to the purchase of foreign currency by the Bank of Russia in the domestic market and due to the reduction of the Russian Federation's debt to the IMF. The volume of net domestic assets during this period decreased, mainly as a result of an increase in the balances of budgets of all levels and state non-budgetary funds in the accounts of the Bank of Russia.

The connection between the monetary base and the money supply is carried out through the mechanism money multiplier. By controlling the mechanism of the banking multiplier, the Central Bank expands or narrows the issuing capacity of commercial banks, thereby influencing the volume of money supply in circulation. The Bank of Russia annually, as part of its monetary policy, sets money supply growth targets, which are calculated taking into account the dynamics of GDP and the possible money supply, are considered as. In recent years, in the Russian Federation, the benchmarks for the growth of the money supply (M2 aggregate) were set as intermediate goal monetary policy. They are determined on the basis of such macroeconomic indicators as the dynamics of GDP and the projected growth in consumer prices in the proposed period. In addition, in the conditions of dollarization of the domestic economy, when forecasting the ruble money supply, it is necessary to take into account the possible movement of funds in the foreign currency accounts of all market participants.

In the process of regulating the volume of the money supply, the purchasing power of money is determined, on which the quality of the performance of the function of a measure of value and a means of accumulation depends on it. Only with a stable purchasing power and stability of the monetary unit, money can be effectively used to measure the cost of all goods, to calculate and compare various economic indicators, assess their dynamics, and also create a reliable basis for regulating the economy by monetary methods. The depreciation of money, the decrease in their purchasing power leads to the fact that a stable foreign currency is used as a measure of value in the national economy, ensuring comparability of prices over time. Prices for all goods are set not in national monetary units, but in foreign ones, for example, in dollars. As a store of value, depreciating national money is also being replaced by foreign currency. The population, followed by enterprises and organizations, prefer to keep their savings in foreign currency, most often in dollars. There is a process of "dollarization" of the economy.

The performance of money as a means of circulation and means of payment, of course, also depends on their stability, but to a lesser extent than the other two functions. Experience shows that even with a high degree of depreciation, national money continues to be used as a medium of exchange and a means of payment, since it acts as a "fleeting intermediary", which reduces the losses of settlement participants to a minimum. But at high inflation rates, even a fleeting presence of heavily depreciating money on hand entails tangible losses for their holders. Therefore, in conditions of hyperinflation, money and in the functions of a means of circulation and payment are also being replaced by foreign currency. However, with the relative stability of the purchasing power of money, the quality of their performance of these functions is determined mainly by the efficiency of the payment system.

Money is something that everyone (or almost everyone) lacks - people, businesses and countries. But money is different. In your wallet, there are both banknotes (sometimes rubles, dollars or even yuan) and bank (credit) cards nearby. And both are money.

But we all know that you can pay with a banknote everywhere (or almost everywhere), and for a bank card you need either an ATM or a terminal. That is, the availability (liquidity) of this money is different. However, it's all money supply. What is money supply? This is exactly what unites your (and not only your) cash and non-cash funds.

The example of bank cards and cash denominations clearly demonstrates that money differs significantly in its availability. Therefore, for the purposes of financial and economic analysis, they are divided into money supply aggregates.

Types of monetary aggregates are commonly referred to as M0, M1, M2, M3 (sometimes also M4).

Consider what is a monetary aggregate. In simple words, monetary aggregates are a set of funds of one "sort". For example, M0 is an aggregate that includes cash in circulation. That is, it is "cash" in the wallets of people, in banks, cash desks of shops and enterprises. There is not so much of such money in the general money supply. In Russia, this is approximately 20-25% of the total mass, and in Europe and the USA - less than 10%.

Consider how the money supply and monetary aggregates affect the stability of the entire financial system. So what is M0-M4:

• M0, as already noted, is "cash";
• M1 includes "cash" and "non-cash" (bank cards), bank deposits ("demand"), account balances of any individuals and legal entities, as well as checks;
• M2 includes M1 and also fixed-term deposits of citizens and legal entities;
• M3 is M2 plus savings deposits of all persons and all types, as well as certificates of banks and organizations, government bonds;
• M4 is not always used and includes "cash" plus the amount of loans issued by banks plus government debt.

Read also: What is an organization's OKOPF and where to get it

As you can see, each subsequent unit includes the previous one. Why is this necessary and what does the share of each aggregate in the structure of the money supply mean?

How money supply and its aggregates are used in economic analysis

In ancient times, almost the entire money supply had the character of M0 - "cash" (coins, and later banknotes). Even 150 years ago it was about 90% of all money. Gradually this share decreased. Already 100 years ago, this share had decreased to one third. These changes stimulated economic growth. Indeed, money “under the mattress” cannot be loaned to purchase raw materials or build a new plant. On the other hand, an increase in the share of "cash" indicates a distrust of people and entrepreneurs in the financial system.

Let's see how the share of "cash" (M0) in Russia has changed over the past 15 years. This share in relation to M2 in the period from 2002 to 2017 steadily decreased from more than 36% to 20%. But, it is noteworthy that there were two exceptions - 2009 and 2015, when this share increased slightly - by 0.5% in 2009 and 0.1% in 2015. We all remember well what kind of processes took place in the economy and the financial sector during this period.

The share of cash in Russia is still noticeably higher than in the developed countries of Europe and the United States, which is primarily due to the underdevelopment of the system of non-cash payments, a significant share of the "gray" and shadow sectors of the economy, which mainly work with " cash” and a certain level of distrust of the population in the banking system. After all, there is still a large proportion of workers who, having received a salary on a bank card, run to an ATM for cashing out.